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Measuring Founding Strategy

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  • Guzman, Jorge
  • Li, Aishen

Abstract

We propose an approach to measure strategy using text-based machine learning. The key insight is that distance in the statements made by companies can be partially indicative of their strategic positioning with respect to each other. We formalize this insight by proposing a new measure of strategic positioning---the strategy score---and defining the assumptions and conditions under which we can estimate it empirically. We then implement this approach to score the strategic positioning of a large sample of startups in Crunchbase in relation to contemporaneous public companies. Startups with a higher founding strategy score have higher equity outcomes, reside in locations with more venture capital, and receive a higher amount of financing in seed financing events. One implication of this result is that founding strategic positioning is important for startup performance.

Suggested Citation

  • Guzman, Jorge & Li, Aishen, 2019. "Measuring Founding Strategy," SocArXiv 7cvge, Center for Open Science.
    • Handle: RePEc:osf:socarx:7cvge
    DOI: 10.31219/osf.io/7cvge
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    References listed on IDEAS

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    Cited by:

    1. Giertz, Jan-Paul & Stracke, Stefan, 2019. "Strategische Personalplanung: Praxiswissen Betriebsvereinbarungen," Study / edition der Hans-Böckler-Stiftung, Hans-Böckler-Stiftung, Düsseldorf, volume 127, number 433, March.
    2. Matias Braun & Luis Felipe Cespedes & Sebastian Bustos, 2021. "Innovation Strategy and Economic Development," Working Papers wp522, University of Chile, Department of Economics.

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